Peak container

I thought I’d just drop that line of Wittgenstein in here to explain my failure to write anything to amuse or annoy readers of Splash for a while. I had come to think that something big is going on, and I was not sure what it might be. So I had, by the standards of a Bear of Little Brain, a Hard Think, and what I have been thinking is that our industry is in the middle of some really big changes.

We all grew up with the mental picture of merchant shipping as the near perfect free market. I think that is ceasing to be true. We all know, thanks to Peter Drucker, that we can’t manage what we can’t measure, but a corollary is, “Just because we can’t measure it, it doesn’t mean it isn’t happening – it means we haven’t worked out how to measure it yet!” There’s a lot of ‘dark matter’ in shipping that we cannot yet measure, but which affects us. Let’s start with boxes.

This is the time of ‘peak container’. The planet wide ‘system’ that is liner shipping using ISO containers is pretty much complete, it isn’t going to change much, nor is it going to grow much further. This is it. The job that Containerisation International set out to do, as a radical campaigning industry magazine, in April 1967, has been done. We have all grown so used to what containerisation looks and sounds and feels like that we no longer remark on it.

As I said before, the container revolution ate all its children, as big revolutions do. None of the shipping companies that started the revolution are in the business in their own names now (no, I haven’t forgotten ‘3J’, now trading as ONE). The victors are all companies with little or no background in ‘liner’ shipping, whose managers had not grown up in the world of the liner conferences, and who saw container space as something to be piled high and sold cheap.

Our ancestors put centuries of effort into building beautiful places for religious worship. These mostly survive, because we think they ought to, but they are not the centres of attention that they once were. They are more visited by the tourist than by the believer. The liner conference tariff was, like a cathedral, the result of the collective efforts of thousands of dedicated people, truly a great work and a thing of great beauty, and it was swept away by the grey box and its inevitable corollary, FAK, as if it had never been.

The aspects of things that are most important for us are hidden because of their simplicity and familiarity. (“That is enough Wittgenstein for one column!” I hear you say!) We don’t actually think about the containerised transport of goods, it’s entirely familiar to us. Almost every creature that walks on this planet has seen an ISO container. We use the words that came with containers to describe our world of shipping, and that makes it hard for us to see things in a different way.

But it’s an old technology. Old technologies often carry on into new eras. The Americans who walked on the moon all wore Swiss mechanical wristwatches. Let’s think for a moment of something else that almost everybody alive has seen – the smartphone. Suddenly the ISO container seems old fashioned – big, heavy, clumsy, made of steel, and needing a lot of dirty, noisy effort to move it and its often somewhat unexciting contents around. It may not contain what it says it contains. It may contain contraband, or it may contain people. This isn’t an exciting new idea; it’s our grandparents’ exciting new idea. The romance of containerisation is dead.

Where are all the exciting plans for new container ports, and for even bigger ships? They aren’t anywhere. Those ideas are not exciting, or remunnerative. The economies of scale have been taken. The money isn’t made by owning boxes, or boxboats, or terminals, and even forwarding is pretty unremarkable. The industry is a mature business, and we know what happens to those – they consolidate into a handful of very big players selling boring products on thin margins.

There really has been a change in what the public – anywhere – wants. People don’t want big stuff; they often can’t afford anywhere to put it – and people don’t want to see the planet wrecked any more. People see a container and they think, “Carbon footprint”. People have turned – to our industry’s puzzled surprise – against ‘globalisation’, and container shipping is just about the most ‘globalising’ thing there is. Look around a big container port and at the roads and rail tracks leading to it and you get an uneasy feeling that you might be looking at a white elephant.

Now, what are we going to do? There is always a way to make money with ships…

Andrew Craig-Bennett works for a well known Asian shipowner. Previous employers include Wallem, China Navigation, Charles Taylor Consulting and Swire Pacific Offshore. Andrew was also a columnist for Lloyd's List for a decade.

3 Comments

AS

February 7, 2019 at 9:34 pm

I wouldn’t contest that containerised shipping is a mature industry that has gone through various cycles that have resulted in a lot of consolidation. Being repeatedly over-leveraged will also accelerate such a process.

I do wonder though, why you wouldn’t do the heavy lifting and take a good stab at suggesting what comes next?

Is it likely that 3D printing is able to produce all manner of goods at their point of demand? If not, then I don’t see containers being displaced any time soon unless air travel imminently becomes higher volume and lower cost.

Martyn Benson

February 8, 2019 at 12:20 am

Isn’t this all preaching to Donald Trump’s choir?
If we are to localize production and if the sweatshops of the Far East cannot make stuff that people will buy at the cheapest prices (God knows there is still an awful lot of useless rubbish in the shops and on websites that we really do NOT need), then the accelerating need for container transport will indeed slow and maybe even shrink.
If tariffs make manufacturers rethink their supply chains (Euro car makers and Airbus in US, Range Rovers in the Czech Republic, Harley Davidsons made in Europe…..) there will be less product making long journeys although we will still be stuck with banalities such as Perrier and Evian (and while we are considering water – also Heineken) being shipped around the world at enormous cost for so-called prestige value and we still haven’t figured a way to establish banana plantations in Glasgow or Rostov-on-Don, so all is not lost.
The growth and growth of containers may be on the wane (and consolidation and a need for joined up thinking may force Lines to look after themselves and return to Conference-like cartels) but the box will go on for good few decades and no hyper-loop is going to replace shipping when freight rates can be kept so low and stable.

Andrew Craig-Bennett

February 8, 2019 at 1:01 am

Crikey, Martyn! I hadn’t seen myself as “preaching to Donald Trump’s choir”, but I see your point!

I certainly agree that the box trades won’t go away for a while; but the container trade won’t grow as it has been growing, because the demand isn’t there. The liner trades are perhaps the only corner of shipping where demand is significantly price sensitive. Given that we have a more than adequate supply of space, thanks to the lines responding to falling freight rates by increasing the supply of tonnage thanks to ever larger ships, designer water and purported beer can travel huge distances, just like car components, and indeed waste paper, because it is so cheap to send stuff by sea.

I think that the racks of $5 dresses and $1 T-shirts will start to dwindle, but as long as the space is there at low freights, stuff will move. This won’t be enough to attract much new investment, though.

I think that Sultan Ahmed bin Sulayem makes an excellent point – what may well happen next is that someone (and we have all been reading about “surveillance capitalism” this week!) will “do a Google” and find a way of using the “digital exhaust” of international trade in containers.

Someone somewhere knows that the box of “piece goods” in 4LH next to the heated bunker tank actually contains fireworks, so safety will be on the side of this development.

Equally someone knows that someone really really needs the components in a box on the top of another stack… put all this together and someone can rebuild the Tariff Book and, in the words of John Samuel Swire, father of the Conference system, “save the Lines from destroying themselves”.

But all this will just be incremental improvement of the system already in place.